PRECIOUS-Gold subdued as investors stay on sidelines ahead of Fed decision

• US Fed statement due at 1800 GMT
• SPDR Gold Trust holdings rose 0.4% on Tuesday

By Brijesh Patel

June 18 (Reuters) - Gold prices inched lower in choppy trade on Wednesday, as investors held back from placing large bets ahead of the U.S. Federal Reserve's policy decision, while also keeping a close watch on the developments surrounding the Israel-Iran conflict.

Spot gold XAU= was down 0.2% at $3,381.10 an ounce, as of 0647 GMT. U.S. gold futures GCcv1 also eased 0.2% to $3,399.30.

"Gold fluctuated as investors tracked the escalation of risk in the Middle East. Tepid U.S. reports on retail sales, housing and industrial output bolstered the case for the Fed to cut rates later this year," analysts at ANZ said in a note.

Iran and Israel launched new missile strikes at each other on Wednesday as the air war between the two longtime enemies entered a sixth day despite a call from U.S. President Donald Trump for Iran's unconditional surrender.

The U.S. is deploying more fighter aircraft to the Middle East and extending the deployment of other warplanes, three U.S. officials told Reuters.

Data on Tuesday showed U.S. retail sales dropped more than expected in May, weighed by a decline in motor vehicle purchases as a rush to beat potential tariff-related price hikes ebbed.

Meanwhile, the U.S. central bank is widely expected to leave interest rates unchanged at the end of its policy meeting later in the day.

Focus will also be on the Fed's updated projections for the economy and the benchmark interest rate.

"We maintain our forecast that structurally strong central bank buying and the boost to ETF holdings from Fed cuts will raise the gold price to $3,700/oz by end-2025 and $4,000 by mid-2026," Goldman Sachs said in a note.

SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, said its holdings rose 0.43% to 945.94 tonnes on Tuesday. GOL/ETF

Elsewhere, spot silver XAG= fell 0.2% to $37.14 per ounce, platinum XPT= rose 0.7% to $1,270.88, while palladium XPD= gained 0.2% to $1,054.30.

Spot gold price in USD per oz